DEPARTMENT OF MATHEMATICAL SCIENCES
City University of Hong Kong
Title: Weak convergence of path-dependent functionals in basket credit default swap pricing with contagion risk
We will discuss computational aspects of basket credit default swap pricing with counterparty credit risk under a multi-name contagion model. This model enables us to capture systematic volatility increases in the market triggered by particular bankruptcies. A drawback of this model is its analytical intractability due to path-dependent functionals, which furthermore causes the potential failure of convergence of numerical approximations with standing assumptions.
In this talk, we present sufficient conditions for the desired convergence of functionals associated with the approximated solution of certain path-dependent stochastic differential equations.
This is a joint work with Yao Tung Huang and Harry Zheng.